Chinese firms continue to exit real estate market

In Pop goes the Chinese real estate bubble, I discussed Chinese big box and electronics retailer Gome exiting the real estate market. Many more non-real estate firms are also exiting this non-core sector. Closer Look: Companies Backtrack on Real Estate
Statistics from consultancy Centaline Property show that a total of 102 property firm equity transactions took place in the first eleven months, with the aggregate value up 122.8 percent from a year earlier to 36.8 billion yuan.
Of the total amount, 30 percent of the equity sold was from projects in second- and third-tier cities or from companies running real estate as a sideline business, Centaline said in a recent report.
Centaline said a massive exodus of funds out of the real estate industry is expected if the government maintains its curbs over the sector for another three to six months.
This is why people are bearish on China. The extent to which mainland firms and local governments rely on real estate profits is not well understood. I suspect many mainland firms will be declaring losses and possibly bankruptcy if the real estate sector plunges (or taking flight as we saw in Wenzhou), and that seems likely because these firms were the marginal speculator these past few years. When they rapidly exit the market, prices will follow.

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